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27 Jul 2015

International Economy

Fed May Express Readiness for Rate Hike at July Meeting (Economic Brief No.3567)

Relevant to the Federal Open Market Committee (FOMC) meeting of July 28-29, KResearch is of the opinion that the Fed may express its readiness for fiscal policy normalization, provided that the US economy continues to improve as anticipated.
We believe that the Fed will vigilantly watch the development of the US economy before deciding to hike the rate; and since reports on US 2Q15 economic activities will only be released after the meeting, we do not expect any rate hike decision just yet this time. We also predict Fed benchmark rate hike to be agreed upon at its September 16-17 meeting instead. If the decision is implemented, it would be the first hike in nearly ten years.

As there is a greater likelihood that the Fed will raise its policy rate, national currencies globally, including the THB, would quite possibly be pressured and depreciate. Although that would be conducive to higher Thai exports to some extent, it is more likely that our financial costs would rise, posing a major challenge to the Bank of Thailand in furthering its monetary relaxation in support of an economic revival here.

International Economy